Oracle Corp. v. Falotti, 319 F.3d 1106 (9th Cir. 2003)

Oracle Corporation terminated the employment of Pier Carlo Falotti, a senior executive of the company who was based in Switzerland, four months before he was scheduled to vest in stock options that were worth more than $85 million. Oracle filed this action in federal court seeking a declaration that Falotti was neither entitled to the stock options nor to receive their value as damages. The district court ruled in favor of Oracle, and the Ninth Circuit affirmed. The Court of Appeals held that only the Stock Option Agreement, which contained a California choice-of-law provision, and not Falotti’s Swiss Employment Agreement governed his eligibility for stock options. Further, the Stock Option Agreement granted exclusive authority to Oracle’s Compensation Committee to determine when an employee ceased to be employed and became ineligible to vest in additional options. The fact that under Swiss law Falotti was entitled to a notice period did not mean that he was eligible to vest in any additional stock options. The Court further determined that Oracle had not breached the covenant of good faith and fair dealing by denying Falotti the additional stock options.